Federated Hermes: Weekly Markets Wrap Up 10 September 2026
This week’s market wrap up explores the strong earnings momentum supporting US equities and the implications of recent moves in the Japanese yen for investors.
Steve Chiavarone, Deputy Chief Investment Officer for Global Equities at Federated Hermes
Up and to the right
2026 US earnings have been stronger than expected so far this year, and the drivers of that strength appear durable enough to warrant a meaningful upward revision to our forecasts. The 2026 earnings picture has been driven by the build-out of AI infrastructure and a resilient economy.
Despite coming into 2026 with a street-high earnings growth forecast, results through the first half of the year have exceeded even our lofty expectations. And the momentum shows no signs of slowing, with positive earnings revisions for 21 consecutive weeks - the longest stretch since 2021. We think earnings will continue to beat expectations over the coming two quarters, pushing full-year 2026 S&P 500 earnings to $370, up from our prior estimate of $340.
What we have articulated above is a constructive view. At the same time, the market is building a new wall of worry around inflation, the possibility of Federal Reserve rate hikes, higher long-term yields, renewed hostilities with Iran and uncertain midterm elections. To be clear, we would likely view a near-term correction as a buying opportunity. As our updated forecasts attest, earnings momentum continues, the capital spending cycle pushes forward and the broader economy remains resilient. From our vantage point, the line still moves up and to the right.
Martin Schulz, Head of International Equity Group at Federated Hermes
Yen's Speculative Surge
The Japanese Yen had been outperforming most major currencies even as Japanese Government Bond yields have pulled back due to carry trade unwinding, a potential Government Pension Investment Fund asset allocation change, and the possibility that the next Bank of Japan rate decision goes big. Recent global currency flows appear to cement the view by global investors that these actions may materialize, and the Yen remains in high demand. Even US Treasury Secretary Bessent is seemingly doubling down on a lower US dollar versus the Yen when he said, 'I am the house now'. However, the move does appear a relatively speculative for the time being.
While the Yen looks to have undershot its recent levels and easily punched through the 155 level, the sustainability of these current levels will depend on what happens next week. While it is a close call, we do not expect the Fed to raise rates this month nor the Bank of Japan to exercise a 50-basis point jumbo hike which seemingly is what the current Yen levels indicate. The Bank of Japan is conservative and historically incremental in its approach.
However, we cannot entirely rule out such a large move by the Bank of Japan. What would such a move mean? Just as a breach of €1.20 would mean major pain for Europe's exporters, a quick yen move past 155 would be a caution line, particularly for Japan's many world-class exporting companies. Yes, currency sensitivity has declined over time, but automobile manufacturers, trading companies, and machinery producers would still be negatively affected.
On the other hand, domestic players in the real estate, utility, and banking industries would likely benefit. Rising Japanese companies supplying the AI semiconductor space may benefit if lower currency levels lead to the easing of rate concerns.